Upmarket Melbourne real-estate agent Jellis Craig is the first agent to fall victim to the Victorian Government’s ‘tough’ underquoting laws. The Age reported that Jellis Craig “will concede to six counts of underquoting, but may contest some of the non-financial penalties being sought by Consumer Affairs Victoria.”
One suspects that Jellis Craig will not be the only agent prosecuted, with The Age noting that, from a survey of 800 properties, the average sale price was 21.2% more than the advertised estimate (the law requires “a price estimate to be based on what ‘a willing but not anxious buyer’ would pay, and prevents agents from advertising prices that are less than their own estimate.”)
Consumer groups have long been campaigning for the laws to be enforced, with Consumer Action Law Centre policy director Nicole Rich noting that real estate agents “are supposed to be professionals, so how are they getting it wrong every week in every suburb?”
However, CEO of the Real Estate Industry of Victoria, Enzo Raimondo, showed little sympathy for buyers, noting that buyers were “naïve” to think that “the property was going to go for the price advertised”.
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The common defence relied on by agents is that during periods of high demand, it is virtually impossible for an agent to accurately determine the final sale price. If Raimondo is correct, the problem can be easily solved.
Rather than require the agent to determine an estimate selling price or range, the only price which should be advertised is the ‘reserve’ price. That is, the price which the vendor is willing to sell the property for. (This by the way, is how virtually every other good or service in Australia is advertised for sale).
If, during the campaign, there is a great deal of interest in the property, the vendor will be entitled to increase the advertised ‘reserve’ price. Each week for example, the property can be advertised for a higher or lower price.
At the auction itself, the agent must announce the current reserve (and announce how the reserve has changed since the property was initially advertised). Then, the bidding can commence from the reserve price. There is no need for vendor bids or underquoting.
If demand results in the property being sold for 20% or 30% more than the reserve, so be it. However, at least the process is transparent and potential purchasers are not misled by deceptive advertising or an unrealistic price range.
Advertising a reserve price makes real estate agents’ jobs easier and provides a fairer system for buyers, while still ensuring that vendors receive a full and fair price for their property.
Have you been the victim of underquoting? Are you a real estate agent finding it difficult to provide accurate quotes in a buoyant market? Email your story to [email protected].